Intrastate Access Constraints under the NGPA: Will Texans be Prohibited from Receiving Texas Natural Gas?

Abstract

In response to a critical shortage in the interstate natural gas market, Congress passed the Natural Gas Policy Act in 1978. Rather than simply repairing the problems of the interstate pipeline system, however, the NGPA has shifted those difficulties to the intrastate market. Specifically, the Texas intrastate pipeline system faces a situation in which it cannot legally access interstate surplies, and it may not be able to afford to bid for its own newly discovered supplies. The end result is an extremely large Texas consumer market incapable of receiving its own or other natural gas supplies. The purpose of this article is to investigate and to analyze the regulatory environment leading to this prodigious result. The article begins with a brief overview of pre-NGPA and NGPA regulation in Section II. Section III investigates the market anomalies inherent in the NGPA regulatory scheme. This section concludes with an analysis of the interaction between contract law and the deregulation time table. The results of the market distortions in Section III are then compared in a "hard" versus "soft" economic environment in Section IV. Finally, Section V suggests methods of reform, with a discussion of the most efficient solution under current market conditions.